News & Issues

It's time we let Alberta's big cities make their own decisions

Posted on February 15, 2014 by Greg Clark

There's been a lot of talk about whether Alberta's big cities should be allowed to add new sources of revenue. Before we dive into that question, it's important to understand the history of municipalities. Unlike the relationship between the federal and provincial governments, municipalities are handcuffed by what's allowed in the Municipal Government Act, which is written by the province. This means that if Edmonton or Calgary determine they need more money for snow clearing, swimming pools or public transit their only choice is to raise property taxes, which account for less than half of the annual revenues of our cities. The rest comes from federal and provincial grants.

Property taxes have been going up because Alberta's two largest cities capital budgets are chronically under-funded. Calgary has a $12.9 billion infrastructure backlog and Edmonton is in desperate need of additional money to expand the LRT and for many other projects. The shortfall was caused by the federal and especially the provincial governments deferring much-needed infrastructure funding while at the same time downloading responsibility on municipal governments.

There are political motives behind the withholding of funding (or perhaps it's just old fashioned mismanagement) but either way our big cities can no longer afford to be wards of the province. It's time for Edmonton and Calgary to stand on their own.

A new deal is needed to give all municipalities more autonomy but Edmonton and Calgary are unique. The Alberta Party believes a Big City Charter should give our two big cities the ability to find new sources of revenue.

A Big City Charter is about much more than just taxation powers but that's the part that gets our attention. Taxation is a means to an end – allowing cites to fund things themselves rather than having to go cap in hand to the province or the feds every time they want to build a recreation centre.

And perhaps there should be a distinction between operating and capital budgets. Operating budgets in both cities have been relatively stable but capital budgets have been increasing as our biggest cities struggle to build the infrastructure needed to accommodate rapid growth. Property taxes are a good fit to fund operations, but new ideas are required for capital spending.

Who should decide? I'm a big believer that the people impacted by a decision should have a say, and for a decision as big as a tax increase I like the idea of a plebiscite. But as a provincial politician that's not my decision. Each city council has to decide on their own if they feel a plebiscite is needed to impose new taxes.

For example, other jurisdictions have held plebiscites to decide if a 'penny tax' that would add 1% onto GST should be used to fund a specific major infrastructure project (usually something like a performing arts centre the entire city would benefit from). The penny tax expires after a set period of time or when the project has been paid for. At that point there would be another referendum on another project or the tax goes away. This has been successfully used in other communities but we can’t do it in Alberta because cities don’t have the authority.

City councils are democratically elected and the people get to decide if they approve of their performance or if they want them booted out of office. I believe it should be up to the people of each city, not the provincial government, to decide what level of services they want and how they will pay for them.

The best government is the one closest to the people, and while it may seem odd for a provincial political party to want to give up power, our first job should always be to do what's in the best interests of the people. I trust the people of Calgary and Edmonton to make the right decisions for their communities and I trust each city council to respect the wishes of its citizens. Our big cities provide services people rely on every day, from clean water to police. They're also bigger than half of the provinces in Canada. They have big responsibilities and deserve the right to decide on their own how to pay for the services they provide.

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Gael McLeod commented
2014-02-23 15:40:26 -0700

I think its important to note that the significant change in property taxes in not the mill rate but the distribution between what the city takes and what the Province takes is changing. I am okay with that providing the “tax room” only goes toward capital projects. I would be even more comfortable if the capital projects were listed or a link provided that outlines exactly where the money is going. The city of Calgary has been pretty good at holding the line on operating costs. If the Province doesn’t want to provide additional taxation authority to the Cities and they aren’t able to provide capital grants as in the past, then perhaps the Province should leave property taxes to the city alone. There isn’t really any reason why education should be partly funded by property taxes.

Urban Ed commented
2014-02-15 14:49:00 -0700

“Both businesses and individuals are feeling tapped out after years of property tax increases.
Property taxes have been going up because Alberta’s two largest cities capital budgets are chronically under-funded.”

It’s worth noting that one of the larger drivers of property taxes increases is that there’s no automatic inflation adjustment, like what’s built into the GST and Income Tax, which are a percentage of a value that rises with inflation as well as economic expansion.

New development does expand the property tax base (with greenfield development, usually much less than it costs to provide expanded municipal services), but contrary to popular belief, higher property prices to not increase municipal revenues. So property taxes MUST rise every year, and any rise less than the municipal price index means municipal revenues are losing ground to inflation (and therefore must also cut services).